- Summary:
- Crude oil price tanks after the Russian energy minister's comments did not give much hope for a Russian commitment to support the OPEC+ outout cuts.
Crude oil prices fell on Friday as the markets responded negatively to comments from Russian oil minister Alexander Novak’s remarks about Chinese oil demand and expected global demand deficit for 2020.
Novak has pointed out that Russia does not see evidence of a drop in demand from China and he was also quoted in a Reuters report as saying that global oil demand in 2020 could drop between 150,000 and 200,000 barrels per day (bpd). Novak cited uncertainties in production in hotspot areas such as Iran, Libya and Venezuela.
The crude oil price has responded negatively to these remarks. By citing an expected deficit in global demand of between 20% and 30% of what OPEC’s technical team is recommending as the production cut level 600,000 barrels per day), the markets are interpreting the situation as seeming unwillingness of Russia to support further production cuts.
Crude oil price on the Brent variety is trading at 54.46, well below intraday highs of 55.38 as at the time of writing.
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Technical Outlook for Brent Crude Oil Price
Crude oil price on the Brent crude variant looks set to end the week on a bearish note, as it has resumed the downtrend and is presently pushing towards the support at 53.26. Also bolstering the price slump are renewed coronavirus fears from several fronts.
The lows of 12 December 2016, 4 September 2017 and 17 December 2018, which are all located at 53.26, appear to be the next valid port of call for Brent crude. A break below this price level could result from reinforcement of risk-off sentiment and would open the door for Brent crude to target 50.64. 46.82 and 44.16 could be the next support targets in line if crude oil price on the Brent variety can head below the $50 mark for the first time in 18 months.
On the flip side, any possible recovery at this time would have to aim for 55.59; a bounce off 53.26 is a likely source of upside momentum. Other upside targets at 57.47 and 58.69 have to rely on OPEC + delivering more than the expected cuts to become achievable.